Facts of the Case

The petitioner, M/s Durga Trading Company, challenged the ex parte assessment order passed under Section 74 of the Central Goods and Services Tax Act, 2017 and the Bihar Goods and Services Tax Act, 2017, along with the appellate order, Form GST APL-04, Form GST DRC-07, and the consequential demand notice issued by the State Tax Authorities. The petitioner contended that the assessment proceedings were completed without providing an effective opportunity of hearing and that the orders were non-speaking and arbitrary. During the hearing before the Patna High Court, the Revenue fairly stated that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication on merits.

 Issues Involved

  1. Whether an ex parte assessment order passed under Section 74 of the CGST Act, 2017/BGST Act, 2017 without granting adequate opportunity of hearing violates the principles of natural justice.
  2. Whether a non-speaking assessment order assigning no reasons can be sustained in law.
  3. Whether the High Court can exercise its writ jurisdiction despite the existence of an alternative statutory remedy where the impugned order suffers from violation of natural justice.

 Petitioner’s Arguments

  • The assessment order and the appellate order were passed ex parte without granting sufficient opportunity to present its case.
  • The impugned orders were non-speaking and failed to disclose any reasons for determining the tax liability.
  • The consequential recovery proceedings, including the demand notice and attachment of bank accounts, were illegal as they were based on invalid assessment orders.
  • The petitioner sought quashing of all consequential proceedings and fresh adjudication after granting a fair opportunity of hearing.

 Respondent’s Arguments

  • The State fairly submitted that it had no objection if the matter was remanded to the Assessing Authority.
  • It was further stated that the case would be decided afresh on merits after granting proper opportunity to the petitioner.
  • The Revenue also agreed that no coercive action would be taken during the pendency of the fresh proceedings.

 Court Order / Findings

The Patna High Court allowed the writ petition and held that:

  • The impugned assessment order suffered from a clear violation of the principles of natural justice.
  • No adequate opportunity of hearing had been granted to the petitioner before passing the assessment order.
  • The ex parte order was a non-speaking order and did not assign any reasons showing how the tax demand had been determined.
  • Even in ex parte proceedings, the adjudicating authority is duty-bound to examine the facts, consider the applicable law, and pass a reasoned speaking order.
  • The High Court observed that despite the availability of an alternative statutory remedy, it could exercise writ jurisdiction where the impugned order is ex facie illegal due to violation of natural justice.
  • Accordingly, the Court quashed:
    • the appellate order,
    • Form GST APL-04,
    • the assessment order,
    • Form GST DRC-07, and
    • the consequential demand notice.
  • The matter was remanded to the Assessing Authority for fresh adjudication after granting adequate opportunity of hearing.
  • The petitioner was directed to deposit an additional 10% of the disputed demand (without prejudice to its rights), while any excess amount deposited would be refunded if found payable.
  • The Court also directed immediate de-freezing/de-attachment of the petitioner's bank accounts and restrained the department from taking coercive action during the fresh proceedings.
  • The Assessing Authority was directed to pass a reasoned speaking order after considering all submissions and documents and preferably conclude the proceedings within two months.

 Important Clarification

The High Court reiterated that:

  • Violation of principles of natural justice is itself a sufficient ground for interference under Article 226 of the Constitution of India.
  • Even where the assessee does not appear, the adjudicating authority must independently examine the material available and pass a reasoned speaking order.
  • Ex parte GST assessment orders cannot be sustained merely because the taxpayer failed to appear.
  • Alternative statutory remedies do not bar writ jurisdiction where the impugned order is patently arbitrary or passed in breach of natural justice.
  • During remand proceedings, recovery cannot continue without fresh adjudication.

 Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017
  • Section 74 of the Bihar Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Form GST DRC-07
  • Form GST APL-04

Link to download the order-https://mytaxexpert.co.in/uploads/1783923631_4016compressed.pdf

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